Research Says Bitcoin Price Booms May Positively Effect Stock Prices

by ·
August 9, 2017

Nautilus Investment Research recently said stock prices tend to soar whenever bitcoin experiences explosive growth. Bitcoin’s price has trended upward about 80% this last month. The S&P 500 has seen monumental increases in lockstep with bitcoin. It appears that bitcoin prices are correlated with rise in stock prices.

The Business Insider article said, “These kinds of astronomical gains in bitcoin, it turns out, are correlated with a strong showing by stocks too, according to Nautilus Investment Research.”

Nautilus Investment Research also detailed that whenever bitcoin gained 30% value in a month, various stocks increased in price a couple of months later. They tweeted a graph showing Bitcoin as a “driver” for SPX.

Why is Bitcoin a Driver for Stock Prices?

There are not any clear indicators why bitcoin is a driver for the stock price. The correlation is unknown. There are some theories that rampant buzz and excitement from bitcoin traders also distributes the same energy to Wall Street. The Business Insider article provided a similar sentiment:

When traders are going nuts about a highly-speculative investment like bitcoin, that same risk-loving attitude might turn up among the folks who trade stocks. What we can’t know from this is whether one affects the other, or if there’s something else driving strong demand for both.

The Business insider article mentioned the Nautilus Investment Research group only has 18 points of reference. This means their data research only looks at 18 variables in regards to bitcoin and stock price analysis. In all, it goes back to 2010, which was the early days of bitcoin.

Bitcoin Price Spillover and the Japanese Effect

There is another line of reasoning why stock prices balloon as bitcoin surges. Some companies could have a direct relationship with bitcoin. In Japan, bitcoin’s price was positively correlated with stock prices as a result of this. It appears the general increase in stock price occurred as a spillover effect, relating to bitcoin’s price. For instance, if a company integrated Bitcoin in Japan, they would see their stocks soar.

Kevin Helms, writing for news.bitcoin.com covered this phenomenon back in June. He said, “Small exchange-listed companies that have started incorporating bitcoin into their businesses are seeing a similar pattern in their share prices. A well-known Japanese day trader, Naoki Murakami, said that ‘All of these gains coincide with bitcoin’s rally,’ Bloombergreported on Monday.”

It is unlikely, however, the same effect is occurring in the United States. Stocks with no relationship to bitcoin seem to be trending upward as well, although it is true the cryptocurrency is penetrating further into the market — so there could still be subtle relationships. No one knows for sure, though. There is certainly a lot of extra cash floating around as bitcoin’s current market capitalization has reached $55 billion. Its current price at the time of writing is $3383.32. This is plenty of extra value to throw around at stocks.

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